When it comes to investing in hotel properties, hotel real estate, recreational real estate, healthcare facilities, senior housing or sports real estate, it is always of vital importance to have leading asset and hotel sales agents such as AYRE Estates. For the AYRE team it has been one of the most important ports of call for investors since 2009. Hotel properties in the right location and with the right operator are among the most profitable and high yielding for hotel investors.
1.) Buying leased hotels as an investment with an assured return
No other form of real estate has generated higher investment returns over the decades than hotel properties in the right locations with the right strategy, the right leases or management contracts and the right operator. Almost no other form of investment can provide consistent returns of 5%, 6%, 7%, 8% and more from decade to decade. In addition to this ongoing return on investment, the increase in the value of the real estate property must also be considered.
Successful investment in hotel real estate is possible for almost any budget. Whether an investor buys a vacation hotel with a fixed indexed lease at a cost of EUR 2.5 million and a yield of 6.5% to 8%, accepts a sale-and-lease-back offer from a hotel chain for EUR 150 million and a guaranteed yield of 6.5% for 15 years, or invests in a hotel, leased from an international hotel chain in a large city or capital city for EUR 100 million and a yield of 4.5% to 6.5%, depends on the individual preferences and budget of the hotel investor. Talk to one of our hotel brokers, we can find the right hotel property for any hotel investor's capital investment.
2.) Purchase of a hotel property as a self-managed investment
By this we mean hotel investors who purchase a hotel as a hotel investment / equity investment and operate it with their own staff. Of course, this drastically increases the rate of return, but also the amount of risk involved, as the hotel is run at its own risk.
These buyers tend to have the necessary financial resources and do not require bank financing. They have little or no hotel or asset management experience and expect a good return as well as individual added value. These buyers are mostly self-employed professionals (accountants, lawyers, consultants), or traders from all possible sectors, industrial and family office.
It goes without saying that this group of buyers needs a very different type of consulting and support. Our specialized brokers and tourism consultants can prepare documents and information especially for this target group and take into account all wishes and requirements of potential hotel buyers / investors. These hotel buyers need special consulting and intensive advice and support, especially in the areas of personnel, controlling and benchmarks.
3.) Equity stake in an owner-operated hotel property with guaranteed return
To keep your guests coming back and earn good occupancy rates, revenues and yields, there is some pressure to invest and expand hotel real estate. New requirements for spas, room facilities and interior design, leisure facilities, hotel ambiance and general purpose areas consume high levels of capital. In addition, the expansion of these facilities also requires more rooms and higher quality hotel suites, which in turn requires more capital.
To finance these investments without applying for a bank loan, many owners partner with an open capital market investor who provides them with the necessary capital. These partners can be private investors, family offices, foundations and perhaps you as well. For many hotel owners, this is the fastest and least complicated way to raise fresh capital for expansion, quality improvement, restructuring, etc. As an investor, you will be involved in the future of the hotel company/business, but not especially in the operation of the hotel. Your investment is safeguarded by the entry of a land charge in the land registry or similar.
The hotel owner and operator must ensure that they actually generate and guarantee the agreed rate of return. In return for your commitment to invest, you will be guaranteed a certain return on investment which may be fixed or dependent on the success of the hotel. Usually it will be a combination of the two. This means that you will receive a guaranteed return on investment, but you will also benefit from the financial success of the hotel. This model really makes sense in the case of successful hotels, or if you are interested in buying more shares in the hotel.
If you are interested in investing in real estate for hotels or buildings for profitability, sports and leisure properties, or real estate for retirement and health, contact one of our specialized AYRE Estates agents for hotel and hospitality properties. Let us know your wishes, desires and requirements, and together we will find the ideal hotel investment for you, combining enjoyment and success!
Information for investors on common types of contracts:
The hotel operator contract - a key criterion for investment in hotel real estate.
Hotels, resorts and hotel properties are characterized by a certain heterogeneity, which is not only due to differences in categories, number of rooms, location or facilities. The possibilities by which the hotel real estate owner and the hotel operator can regulate their cooperation are equally diverse. When it comes to hotel real estate investments, the hotel operator contract is of particular importance: it determines the distribution of risk between the hotel owner and the hotel operator.
The hotel management contract is crucial to the fundamental nature of real estate investment. In the national and international hotel landscape, there are still essentially two forms of contract chosen for operating contracts: the lease or the management contract.
Lease agreement for a hotel: passive investment in a hotel property
The hotel lease represents a passive investment in a hotel property whereby the hotel lessee generates income from the hotel's operations, in particular from its activity as a sublessee of hotel rooms and other facilities, and through the provision of other hotel services. The real estate investor can only expect sustained investment success if the rent guaranteed by the hotel lease is accustomed to market conditions and remains so. Therefore, it is especially important to analyze the current lease rates and any possible cases of excessive or insufficient lease conditions.
Hotel management contract: active management of a hotel property
The hotel management contract, however, represents an active investment, not only actively investing in the hotel real estate. This type of investment focuses on the operation of the hotel and all the opportunities and risks involved therein. The management company simply acts as an "operator" on behalf of the owner. The manager generally receives compensation related to turnover or profits and carries little economic risk, since, with the exception of senior management, most of the staff is hired by the owner of the hotel property.
Hybrid leasing and management contracts are on the rise
. From hotel leases with fixed lease rates to hotel management contracts where remuneration depends on success, there is a wide variety of structural options. In practice, these hybrid forms known as 'hybrid contracts' are becoming increasingly important. Multi-stage models are also common, where, for example, a contract is signed between an owner and an operating company for a lease and this operating company holds a management contract with a branded company.
The tourism experts and tourism consultants of the leading international tourism consultancy, or your hotel broker at AYRE Estates (www.ayreestates.es/contacto) will be pleased to offer you expert advice on the selection of the operator contract for your hotel property.
AYRE Estates service package for the purchase, lease and investment of real estate properties in hotels and buildings:
AYRE EstatesConsulting:
Advice on purchase, lease or investment search
Selection by country and region
Selection of appropriate hotel type / hotel style
Selection of size and category
Selection by purchase price and yield expectations.
Advice on real estate orientation and future development opportunities.
Advice on whether the requested purchase price or lease amount is appropriate; property appraisal.
Search
Provide balance sheets / commercial valuations for the last periods, occupancy rates, renovation and building requirements, inventory and inventory lists, land registry extracts, land and building plans, energy efficiency certificate, existing debts and liabilities, etc. and assist with the interpretation of these documents
Operational analysis
Preparation of financial data
Calculation of investment costs
Preparation and presentation of future development
Comparative analysis
AYRE Estates strategic consulting:
Advice on all investment decisions
Accompanying and advising on all aspects of the purchase
Development and implementation of negotiation strategies
Structuring of transactional processes
Consultation and negotiation of the optimal form of financing
Advice on the optimal contract structure on optimal contract structure
Negotiating purchase and lease agreements with operators
Drafting and finalizing contracts
Valuations using international standards
Preparation and acquisition work for acquisitions
Preparing exit strategies. Expansion plans.
Installation of hotel software, hotel control, staff control, etc.
In order to receive information about any investment property in our real estate agency, a client registration, LOI*, POF** letter and acknowledgement of fees are required.
*LOI, an acronym used to abbreviate the term Letter of IntentThis is an acronym used to abbreviate the term Letter of Intent. We request this document in the pre-contract phase in which the negotiating parties put in writing a number of statements of intent and declarations on the principles and rules of the negotiation process.
** POF, an acronym used to abbreviate the term Proof of Funds, this letter or documentation certifies that an individual, institution, entity or corporation has sufficient funds (money) to complete a transaction. A POF is usually issued by a commercial bank or associated agent to provide confidence or assurance to another party, usually the selling party, that the person or entity in question has sufficient funds to complete the agreed purchase, the subject of the POF signature.
Since we are a dynamic and experienced company in assets of large surfaces and we have: hotels, resorts, gas stations, nursing homes, hospitals, clinics, large premises, shopping malls, casinos, land, assets with debt and in profitability. We follow an audited procedure.